1-7-2023 (LONDON) The U.S. Securities and Exchange Commission (SEC) has deemed recent filings for launching a spot bitcoin exchange-traded fund (ETF) inadequate, according to sources familiar with the matter, as reported by the Wall Street Journal on Friday morning. This announcement had an immediate impact on the price of bitcoin (BTC), which plummeted by over 3% or $1,000 within minutes. At the time of writing, bitcoin was trading slightly above $30,000.
The SEC has reportedly informed Nasdaq and CBOE, the exchanges responsible for filing the spot ETF applications on behalf of asset managers like BlackRock and Fidelity, that the submitted filings lack clarity and comprehensive information. The main concern raised by the SEC is the lack of detail regarding the “surveillance-sharing agreements,” particularly the identification of the spot bitcoin exchange to be utilized. However, the asset managers have the option to update their applications and refile them. CBOE has expressed its intention to do so, as confirmed by statements provided to the Wall Street Journal and CoinDesk.
Previous rejection orders by the SEC regarding ETFs have stipulated that the sponsor of a bitcoin trust must establish a surveillance-sharing agreement with a regulated market of significant size. A market of significant size ensures that any attempts to manipulate the price of an exchange-traded product (ETP) must occur on the same market where the ETP is traded. This agreement enables the sponsor and trading platform to identify and prevent potential market manipulators. Currently, no federal regulator oversees spot bitcoin markets, a situation the Commodity Futures Trading Commission has sought to change for several years.
An SEC spokesperson declined to comment on individual filings when approached by CoinDesk. However, it is worth noting that BlackRock’s spot ETF filing in mid-June sparked a substantial price surge in bitcoin, propelling the cryptocurrency from below $26,000 to reach one-year highs above $31,000. The filing by BlackRock also prompted other asset managers, including Invesco and Fidelity, to refile their previously rejected spot bitcoin ETFs.
Representatives from BlackRock, Fidelity, and Galaxy (who filed in collaboration with Invesco) have chosen not to provide comments to CoinDesk at this time.
